You've heard over and over again about how the horrible employment slump is associated with deleveraging and the balance sheet recession, but now there's proof.

A new study (.pdf) from Professors Amir Sufi and Atif Mian (via Calculated Risk) draws a bright line between household debt, deleveraging, and unemployment.

What Sufi and Mian do is look specifically at counties that, during the boom, had an usually high level of household debt. Then they establish, using data from Mastercard, that those counties saw the big dropoff in consumer demand post-bust. And then they establish that in those counties, employment in non-tradable sectors (basically services that have to be done in person) fell off hard.

Thus the connection between debt, deleveraging, lack of demand, and unemployment is clearly established.